Types of Mortgage Loan Programs
To help you better understand the various types of mortgage loan programs, we have outlined them below. A mortgage banker can assist you in the process and help you determine which program best suits your needs.
Conventional Mortgages
- A conventional mortgage can be any loan that is not federally insured or guaranteed by the government, even though many conventional mortgage guidelines come from government-sponsored entities Fannie Mae and Freddie Mac
- Conventional mortgages come in many different packages: Fixed- and adjustable-rate, balloon mortgages, etc.
- Conventional mortgages currently require at least 5% as a down payment.
- Private Mortgage Insurance (PMI) is required with less than a 20% down payment.
- Escrow for taxes and insurance is required if you have less than 20% down payment.
- Sellers can pay closing cost of up to 6% (3% on 5% down and 2% for investors).
- Less-than-perfect credit may be cause for a higher interest rate, depending on your Credit Score.
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VA Loans
- Zero-down payment loans for eligible veterans and their spouses.
- Guaranteed by the Department of Veterans Affairs
- 15 and 30 year Fixed-Rate Mortgage
- VA funding fee can be financed
- No monthly PMI is required.
- Escrow for taxes and insurance is required.
- Seller-paid closing cost up to 100% is allowed
- No pre-payment penalty.
- Less-than-perfect credit is acceptable
- No income limits
FHA Loans
- A Federally Insured Loan Program provides mortgages for owner-occupied homes with as little as a 3.5% down payment
- Fixed-Rate and Adjustable-Rate Mortgages
- Up-front Mortgage Insurance Premium (MIP) can be financed into the loan
- Low Monthly MIP included in payment
- Escrow for taxes and insurance is required
- Seller-paid closing cost of up to 6% of the sales price is allowed
- No pre-payment penalty
- Less-than-perfect credit is acceptable
- Easier to qualify for than a conventional loan
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FHA Rehabilitation Loans
- Allows the buyer of an owner-occupied property to finance certain repairs, improvements, and even appliances into the mortgage
USDA Loan
Unites States Department of Agriculture’s office of Rural Development provides Zero Down Payment Loans for owner occupied homes in qualifying areas.
- 30 year Fixed-Rate Mortgage
- USDA Guarantee fee can be financed
- No monthly PMI is required
- Escrow for taxes and insurance is required.
- Seller-paid closing cost of up to 6% of the sales price is allowed
- No pre-payment penalty
- Less-than-perfect credit is acceptable
- Income limits apply
Need More Information? Check out the benefits of mortgage pre-approvals or use our mortgage loan calculator to help determine your monthly payment.
